You'll probably live longer than you thought... but you'll definitely have to pay for it! Four in five elderly workers underestimate average lifespan

People who are planning to take responsibility for their own retirement finances when restrictions are lifted next April have been warned they may be underestimating how long they're likely to live.

Retirement specialists MGM Advantage has carried out research that shows 82 per cent of Britons approaching retirement age may have to make their pension pots stretch for years longer than they planned.

Men aged 55 to 64 think they'll live to 81-years-old while women predict they'll live to just 79 on average, but ONS figures from 2012 suggest that average life expectancy for people in this age range is 86 for men and 89 for women.

Living longer: Life expectancy levels continue to rise, but not everyone is aware of it.

With millions of defined contribution pension savers being given the run of their retirement pots from next year, MGM has warned to be realistic about how long they will have to make their savings last.

MGM's Aston Goodey said: 'It is important that people have a realistic expectation as to how long they are likely to live, so that they can make adequate provision for retirement.

'The Chancellor’s Budget changed the pensions’ landscape forever allowing people more freedom and choice with their pensions. We fully support the idea that individuals have more say over how they access and spend their pension savings.

Pensions: Deal Finders

'With increased choice comes the risk that individuals may live longer than they anticipated meaning they may outlive their retirement savings.

'If you don’t plan properly then the funds built up could be exhausted in later life. This could lead to a decline in living standards and may come at the exact point you need regular income for things such as care fees.'

Unsurprisingly given it sells enhanced annuities, MGM claims that there is no other product in the retirement market 'that offers such a high rate of return for life than an annuity'.

But the annuity market has been beset by historic low rates that has seen rates fall below the £5,000-a-year mark for a £100,000 pot, though they have improved in the last 18 months.

Underestimation: The life expectancy for people aged 55 to 64 is 86 for men and 89 for women, but many think they'll live much shorter lives.

What's more, following a year-long review the Financial Conduct Authority found that around 150,000 people who buy an annuity each year got poor value-for-money products when they could have got much better rates of return from a new provider.

Millions were given a way out of annuities by the Government at the latest Budget, when it was announced they could dip into their pension pot as and when they like from next April after the age of 55.

Shares in insurers plummeted, with analysts predicting the annuity market would shrink by anything up to 90 per cent.

A survey carried out by Hymans Robertson released today revealed that just a quarter of pension savers intend to use most or all of their pension pot to buy an annuity once the new rules kick in.

Advertisement

Share or comment on this article:

Four out of five workers underestimate how long they are likely to live